Fear Index? Sky Rocketing?

Macro Gossip
Welcome Back VIX.

Picture this: the Fed whispers "no more rate cuts," and the VIX decides it's auditioning for a reality show titled "When Volatility Strikes." What we just witnessed in the market was no ordinary response, it was a full-blown drama fest with the Volatility Index (VIX) taking center stage.

Rate Cuts: The Drama Unfolds

The Fed did the predictable thing, cut rates as expected. No shocker there, right? Wrong. It seems the VIX interpreted this move as the green light to stage a theatrical comeback. After months of snoozing near record lows, the "fear gauge" skyrocketed like it just discovered caffeine. You could almost hear traders gasp in unison, “Wait, why now?”

What’s Next?

As the dust settles, traders will likely be asking themselves one question: Was this a genuine warning sign, or just a volatility spike to keep things interesting? Watch the VIX closely, if it settles back down, we’ll chalk this up to end-of-year jitters. But if it stays elevated, expect narratives about recession fears and monetary policy missteps to dominate every financial headline.

Either way, this is one for the books. The Fed’s rate cut has turned into a perfect cocktail of uncertainty, sending the VIX into a frenzy and giving us all a reason to gossip.

The takeaway? Never underestimate the market’s ability to make drama out of the most mundane events. Cheers to 2025, looks like it’s going to be a wild ride.

Quick & Dirty Trade
Dow Jones Makes History

The Dow Jones has traded lower for 10 consecutive days, the last time this occurred was over 50 years ago! Here’s what’s going on:

• Why: Federal Reserve Chairman Powell and the FOMC have posted up a hawkish cut on Wednesday, they have increased their forecasts on inflation and taken off the idea of cuts next year.

• What: So what can we do about this? well this was a bit of a surprise to the markets with the Dow in particular down nearly 2% on the day. We know stocks can rebound so I (Jon here) will be watching key demand zones.

Verdict? When stocks fall we often see strong rebounds, will we see one before the end of the year though?

Macro Insight, Micro Impact
“and the bells are ringing out for…stock market crashes”

Well some may say the jingle bells are ringing, I’d say the alarm bells are too.

I guess I should stop with the Christmas puns now.

Why This Matters:

• Historically the 10y-2y spread has inverted before every U.S. recession since the 1960s, making it a reliable signal.

• It's considered reliable because inversions suggest that investors are shifting money into long-term bonds as they fear an economic downturn.

However, it’s not the greatest timing tool…the yield curve inversion typically happens 6-18 months before a recession begins.

Did someone say “Alexa, set timer for 6 months”.

Macro Hack of the Week: Master the Art of Simplifying Complexity

If you're new to macro trading, here's a golden rule: focus on one key relationship at a time. Macro can feel like a tangled web of data, but your edge lies in finding simple cause-and-effect patterns. For example:

• When central banks cut interest rates, currency values often drop due to reduced yield appeal.

• Rising oil prices? Check the ripple effect on inflation data and oil-sensitive currencies like CAD.

Don’t get overwhelmed trying to analyze everything. Pick a theme (like inflation, interest rates, or commodity prices), find how it influences specific markets, and test how that relationship plays out in the past.

Remember, macro is a puzzle, start with the corners (the basics), and the picture will come together over time.

Do NOT Trade Gold Without Watching This.